What Are FHA Loan Requirements for a Cosigner?

The FHA loan requirements for a cosigner are not much different than a traditional loan. For example, a person who will not live in the home after closing can cosign the loan for a primary borrower provided that he or she is directly related to the borrower, either by blood or by marriage. The cosigner must also a good enough credit score to meet the credit requirements of the loan, or it will be denied. If the original applicant does not have a high enough income to meet the requirements, the cosigner can be added, as all their income will be considered as well. The debt ratio cannot exceed more than 40% of the applicant's gross annual income, as this will put the borrower in a bind and increase the likelihood of default. If the debt ratio is higher than 40% the loan will be declined, or the borrower will be asked to pay down some debt before the loan will be approved.

Even with a cosigner on the loan, the applicant must pay closing costs and other fees associated with the loan. If for any reason the borrower cannot afford these fees, the cosigner can give the borrower the money as a gift without suffering any penalty for the purpose of the loan. 

 

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